A pension fund manager is considering three mutual funds. The
first is a stock fund, the...
50.1K
Verified Solution
Link Copied!
Question
Finance
A pension fund manager is considering three mutual funds. Thefirst is a stock fund, the second is a long-term government andcorporate bond fund, and the third is a T-bill money market fundthat yields a rate of 5.6%. The probability distribution of therisky funds is as follows:
Ă‚Â Ă‚Â
Expected Return
Standard Deviation
Ă‚Â Ă‚Â Ă‚Â Stock fund (S)
17% Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â
46% Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â
Ă‚Â Ă‚Â Ă‚Â Bond fund (B)
8Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â
40 Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â Ă‚Â
Ă‚Â Ă‚Â
The correlation between the fund returns is 0.16.
Ă‚Â Ă‚Â
Solve numerically for the proportions of each asset and for theexpected return and standard deviation of the optimal riskyportfolio. (Do not round intermediate calculations andround your final answers to 2 decimal places. Omit the \"%\" sign inyour response.)
Ă‚Â Ă‚Â
Ă‚Â Ă‚Â Portfolio invested in the stock
%
Ă‚Â Ă‚Â Portfolio invested in the bond
%
Ă‚Â Ă‚Â Expected return
%
Ă‚Â Ă‚Â Standard deviation
%
Answer & Explanation
Solved by verified expert
3.9 Ratings (596 Votes)
PORTFOLIO INVESTED
See Answer
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
